Revocation of Continuing
Guarantee

Continuing guarantee may be revoked in any of the following ways:

1. By notice of revocation: Section 130 of the Contract Act lays down that a continuing guarantee may be revoked at any time by the surety in relation to future transactions by giving notice to this effect to the creditor. Thus, the revocation discharges the surety for any transaction made subsequent to the notice or revocation. However, the surety remains liable for the previous transactions which
have already been made.

2. By death of surety: According to Section 131, in
the absence of any contract to the contrary, the death of the surety operates as a revocation of a continuing guarantee so far as regards future transactions. Thus, the guarantee is automatically revoked on the death of the surety and it is not necessary that the notice of death should be given to the creditor. It may be noted that the revocation by death of surety is effective for future transactions only, and the surety’s legal heirs remain liable for those transactions which had already been made before the death of the surety.

3. By discharge of surety in various circumstances:

A continuing guarantee is also revoked under all circumstances under which a surety is discharged from his liability, such as:

1.By novation (Section 62)

2.By variance in terms of contract (Section 133)

3.By release or discharge of principal debtor (Section 134)

4.When the creditor enters into an agreement with the principal debtor (Section 135)

5.By creditor’s act or omission impairing surety ‘s eventual remedy (Section 139)

6.By loss of security (Section 141)

7.By invalidation of contract (Sections 142, 143, 144).